On Friday, Deutsche Bank (ETR:DBKGn) maintained its Buy rating on Wartsila Oyj Abp (WRT1V:FH) (OTC: WRTBY) with a steady price target of EUR19.00. In a strategy update call, the group CEO indicated that business fundamentals are robust across the company's portfolio, with no alterations to the current guidance. The share has seen favorable performance in the preceding weeks, and management anticipates a stronger second half of the year in the Energy equipment sector, along with a more evenly distributed revenue between equipment and service.
The CEO's update comes ahead of the pre-close call scheduled for June 19th and the upcoming second-quarter results, which will be disclosed on July 17th. The company's outlook remains positive, with expectations set for improved performance in the latter half of the year, particularly within the Energy equipment division.
Wartsila's stock has been on an upward trajectory recently, reflecting investor confidence in the company's strategic direction and its ability to maintain a steady course. The management's forecast for a more balanced revenue mix is also a sign of the company's ongoing efforts to diversify its income streams.
Investors have been closely monitoring Wartsila's progress, especially in light of the upcoming financial updates. With the second quarter results on the horizon, stakeholders are looking for confirmation that the company will continue to perform according to the guidance provided by the CEO.
In other recent news, Morgan Stanley (NYSE:MS) has adjusted its price target on Wartsila, raising it slightly from EUR12.20 to EUR12.30, while maintaining an Underweight rating on the stock. This adjustment comes in the wake of the firm's evaluation of Wartsila's new divisional structure and improved margin assumptions. Morgan Stanley has also updated its earnings per share (EPS) forecasts for Wartsila for the years 2024 through 2026, indicating a 3.1% increase for 2024, a 1% increase for 2025, and a 0.5% increase for 2026. These updates reflect the integration of Wartsila's new divisional structure into the firm's projections.
Despite these revised forecasts, Morgan Stanley's 2025 group EBITA prediction remains 4% below the current visible alpha consensus. For the first quarter of 2024, Morgan Stanley expects a relatively stable performance from Wartsila, with an order forecast of €1.86 billion, 3% ahead of the current consensus. However, potential risks have led Morgan Stanley to maintain an Underweight rating on Wartsila, anticipating a potential decrease in ship orders that could affect Wartsila's Marine orders in the latter half of 2024 and into 2025.
Lastly, Morgan Stanley notes that Wartsila's valuation appears relatively high, with the company trading at 13.3 times its enterprise value to EBITA ratio, which is now close to the sector average. Furthermore, Wartsila's projected free cash flow yield of 3% for 2024-2025 is viewed as less attractive compared to the sector. These are among the recent developments concerning Wartsila.
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